Savings bond sales rise dramatically

Treasury officials amazed at the volume in October, following the terrorist attacks.

January 11, 2002|By GREGORY KARP Of The Morning Call

If there's any doubt the September terrorist attacks inspired patriotism and a falling stock market forced investors to be more conservative, witness savings bond sales in October.

In Lehigh and Northampton counties alone, $14.7 million worth of savings bonds were sold in October. By comparison, just $19.7 million were sold in the preceding 12 months combined -- and that was a decent year.

"The one month of October is the most remarkable increase that we have seen in this program, ever," Bob Daday, area manager for the Department of the Treasury, said Thursday.

Nationally, it was $2.7 billion in sales for October.

"They're absolutely staggering numbers," Daday said. "I'd say a substantial amount of dollars came because of what happened on 9-11, but at the same time, the stock market continued a freefall.

"I've just never seen anything like it in 23 years."

Savings bonds are backed by the U.S. government and are viewed as very safe, as opposed to volatile stocks. Sales of savings bonds usually move in the opposite direction of major stock market indexes, Daday said.

Adding to the urgency of buying savings bonds in October was an interest rate cut by the Treasury on Nov. 1. That lowered the yield on the EE series bond from 4.5 to 4.07 percent, and on the I-Bond from almost 6 percent to 4.4 percent. Expectations of those cuts meant some people rushed to buy bonds before Nov. 1.

But even without the numbers in October, the first month of the Treasury's fiscal 2002 year, fiscal 2001 was a great year, officials said.

Sales in the Lehigh Valley were $19.7 million, the highest in five years and a 23 percent increase over 2000.

Carbon County sales were up 39 percent, Bucks County sales were up 33 percent, Montgomery County sales were up 36 percent and Berks County sales were up 17 percent.

In December, the government introduced the Patriot Bond in response to calls for a terrorism-related war bond.

The bonds are series EE savings bonds that have been renamed. The interest rate on the Patriot Bond, which is pegged to 90 percent of the yield on five-year Treasury notes, is 4.07 percent. Interest is compounded semiannually.

Like the EE bonds, Patriot Bonds are sold for half their face value. Regardless of their interest rates, they are guaranteed to at least double in 17 years, an average rate of 4.12 percent.

The bond will yield less than another government savings bond indexed to inflation, called the I-Bond. The I-Bond yields 4.4 percent and changes every six months depending on how high consumer prices go.

Patriotism aside, unless the nation sees extremely low inflation for a long time, the I-Bonds are likely to be better-yielding investments, financial experts say.

At a news conference Thursday in Allentown, J. Michael Lee, president and chief executive officer of Hospital Central Services in Allentown, was named as the 2002 savings bond general campaign chairman for 14 counties in the region. He replaces Donna Mulholland, former president and CEO of Easton Hospital, who headed the campaign last year.

Tony Iannelli of the Lehigh County Chamber of Commerce was chairman for the Lehigh County savings bond sales. Candace Curie of the Bethlehem Area Chamber of Commerce was the chairwoman for Northampton County.

The savings bond goal for fiscal 2002 is $20 million for Lehigh and Northampton counties.